30 Mar Do I Get a Free House?

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In certain cases, mortgage foreclosure defense can be so effective that the Plaintiff prosecuting the foreclosure is unable to successfully foreclose. This has been known to happen in cases involving “lost promissory notes” where the foreclosing Plaintiff is unable to prove standing sufficient to enforce the mortgage.

So what happens to the borrower’s status with regard to the home when the lender’s (or entities purporting to be the lender) foreclosure efforts prove unfruitful? This is a difficult question to answer by reference to traditionally applicable legal authorities to which lawyers are accustomed to referring, like common law precedent, rules of procedure, as well as statutory law like the Uniform Commercial Code. This is likely due to the fact that such authorities have generally not kept pace with developments in finance like securitization and “MERS originated mortgages”.

What is clear in the law is that even if the borrower in default escapes the foreclosure proceedings to live another day, there is, at minimum, a cloud on the title to the home which will prevent the borrower from being able to successfully sell, refinance or bequeath the home, and the law has no clear answer about what the borrower should do to resolve the issue. Some real estate practicioners have suggested “Quiet Title” actions in which the homeowner would file a lawsuit that names all purported lienholders defendants and seeks to “quiet” the title, i.e., extinguish all claims of the named defendants to the property.